Annelies: New jobless claims climb more than expected

New jobless claims climb more than expected

Link with corporate finance

This week I selected an article that is indirectly related to corporate finance. In previous articles on my blog it became clear that current corporate finance is difficult because of the recent financial crisis. These difficulties are also reflected in the unemployment rate in the US. That is what this week’s article is about.

Summary

Last week, there are more laid-off workers in the US because the employers don’t hire employees in spite of the improved economy.

The Wall Street economists expected a slightly decrease of jobless claims, but instead there is an increase from 520 000 people with jobless claims until 531 000 people. Economists say that the unemployment benefits give a good image of the readiness of enterprises to hire people and the improved economy.

The four-week average of claims is slightly decreased until 523 250. It is the lowest level since January and 125 000 below the peak of the recession during the spring. However, that still is way to high since economists consider 325 000 claims to be consistent with a healthy economy.
A lot of people are moving into extended benefit programs. These programs were approved by the US Congress in response to the recession. In the US laid-off workers get an unemployment benefit for 26 weeks. The extensions approved by the Congress add up to 53 weeks of benefits on top of these 26 weeks.

Last week, the total numbers of recipients dropped with 50 000. Economists say that this decline is not because people find new jobs, but because recipients are running out of benefits.
Although the economy is expected to grow in the last quarter with 3% employers remain reluctant to hire. They wait until it becomes clear that the economic recovery will last.
In this respect the recent decision of Sun Microsystems Inc. to eliminate up to 3,000 jobs, as it awaits a takeover by Oracle Corp. is typical.

My opinion

The article clearly indicates that the financial crisis has devastated the trust of companies and employers. Although the economy starts growing again, employers are still afraid of hiring new workers. I believe that is a dangerous situation because when the unemployment rate remains high consumer’s expenses will not increase. And that in turn can have a negative effect on the economy.

Another thing I would like to say about the article is that in the US, after a period of time, you can no longer claim an unemployment benefit. That is different from our country where there is no limit to the time you can receive a jobless claim. Although people can abuse this right, I think that in the current economic crisis it is necessary that people who remain unemployed for a long time, still can receive an unemployment benefit. After all, our society needs to protect the weakest. They are the ones who are hit most by the economic crisis. Therefore I believe that it is important that we have a solid social security for them. In this respect unemployed people are better off in Belgium than in the US.

Source: http://www.msnbc.msn.com/id/33427918/ns/business-stocks_and_economy/

Greet Annelies